Definitive Proxy Statement by Overland to Get Tandberg
Deal expected to be completed by end of January 2014
This is a Press Release edited by StorageNewsletter.com on December 26, 2013 at 2:54 pmOverland Storage, Inc. has filed with the SEC definitive proxy materials in connection with its previously announced definitive agreement to acquire Tandberg Data Holdings S.à.r.l.
The company expects to begin mailing the definitive proxy materials to its shareholders the week of December 23rd. The special meeting of Overland shareholders will be held on Thursday, January 16, 2014 at 1:00 p.m. Pacific Time. The meeting will be held at CityView Plaza, 125 South Market Street, 2nd Floor, Room 225B, San Jose, CA. All shareholders of record of Overland’s common stock as of the close of business on December 9, 2013 will be entitled to vote their shares at the meeting either in person or by proxy.
The Overland board of directors unanimously recommends that Overland shareholders vote “For” the proposal to approve the issuance of shares of the company’s common stock to the shareholders of Tandberg pursuant to the acquisition agreement and each of the other proposals described in the definitive proxy materials. Under the terms of the acquisition agreement, the shareholders of Tandberg will be entitled to receive 47,152,630 shares of common stock of the company, subject to certain adjustments as defined in the proxy materials filed with the SEC.
The acquisition, which is currently expected to be completed by the end of January 2014, remains subject to customary closing conditions, including shareholder approval.
Comments
Overland said to be acquiring Tandberg but it's not a simple deal where a company acquired another one at a specific price. Here it's a 100% stock transaction essentially involving Cyrus Capital, the real actor here, as Tandberg's 100% owner and a major Overland's investor with 20% of the shares.
It's the eighth acquisition of Overland:
| Year | Acquired company | Price in $ million | Activity of acquired company |
| 1992 | Mountain Engineering | NA | 3480 tape drives |
| 2000 | Tecmar | 3 | Travan tape drives |
| 2003 | Okapi Software | 5 | D2D backup appliance |
| 2005 | Zetta Systems | 9 | Primary disk storage subsystem |
| 2008 | Tavata Software (some IPs) | 1.25 | De-dupe software |
| 2008 | Adaptec (assets) | 3.6 | SnapServer NAS business |
| 2010 | MaxiScale | NA | Clustered file system |
| 2013 | Tandberg Data | NA | Tape and disk systems for backup and DR |
The two companies began to explore the possibility of a business combination in August 2012 and entered into a definitive agreement subject to certain closing conditions. It will be competed after approval of Overland's shareholders in a meeting next January 16, 2014
Note that Overland agreed to pay Tandberg a termination fee of $900,000 if the agreement is terminated by Overland because of accepting a proposal from another party.
Finally Tandberg will become a wholly-owned subsidiary of the US company and Overland's board of directors will be expanded to seven directors, five of them from current Overland's board and two be selected by Tandberg's shareholders but the former shareholders of Tandberg - Cyrus Capital - will own 54% of the common stock of Overland.
Overland's CEO Eric Kelly will continue to serve as president and CEO of the combined company, Kurt Kalbfleisch will continue to serve as CFO and Randy Gast of Overland will serve as COO. No position has been attributed to current Tandberg's CEO Pat Clarke, previously working at ... Overland.
The history of Tandberg began in 1979, being established as a separate data division when the Tandberg Radio Factory was dissolved into separate entities. After manufacturing QIC/Travan tape units, it entered into 4mm DAT, SLR, DLT, 8mm, LTO drives and libraries, NAS and RDX.
It was the result of the following acquisitions:
| Year | Acquired company | Price in $ million | Activity of acquired company |
| 2001 | Overland's SLR autoloader business | 1 | SLR tape autoloaders |
| 2002 | Land-5 | NA | RAID and NAS technology, became InoStor |
| 2005 | Computer Design Group | 6.5 | RAID-protected iSCSI appliance |
| 2006 | Exabyte | 28 | Tape drives and automation products |
| 2008 | Tandberg Storage | NA | HH LTO tape drive design |
| 2011 | ProStor Systems (assets) | 17.8 | Removable 2.5-inch HDDs (RDX) |
Headquartered in Dortmund, Germany, Tandberg has subsidiaries in China (manufacturing and repair plant), Hong Kong, Japan, France, Norway and USA.
Financial Data of Tandberg
(year ended December 31)
| in $ million | 2011 | 2012 |
| Revenue | 79.6 | 67.6 |
| Loss from operations | (3.9) | (7.5) |
| Net loss | (7.6) | (11.5) |
Sales by product for fiscal year ended December 31
| 2011 | 2012 | |
| Tape Drives | 21.9% | 20.2% |
| Tape Automation | 14.7% | 15.5% |
| RDX | 37.3% | 40.7% |
| Disk Solution | 1.1% | 0.5% |
| Media | 16.0% | 13.7% |
| Others | 0.8% | 0.5% |
| Services | 6.7% | 6.3% |
| RDX Royalty | 1.5% | 2.6% |
| Total | 100.0% | 100.0% |
Tandberg's net revenue decreased to $29.7 million during the six months ended June 30, 2013 from $34.7 million during the six months ended June 30, 2012, a decrease of 14.4%. The decline was due to lower revenue from branded products primarily as a result of decreased sales volumes in tape automation, tape drives and media. At June 30, 2013, it had a cash balance of $1.8 million, compared to $2.8 million at December 31, 2012. OEMs include Apple, Fujitsu, Toshiba, HP, Hitachi and NEC.
Sales by product for six months ended June 30
| 2012 | 2013 | |
| Tape Drives | 20.7% | 14.9% |
| Tape Automation | 13.6% | 12.3% |
| RDX | 39.8% | 45.2% |
| Disk Solution | 0.5% | 1.6% |
| Media | 15.1% | 14.4% |
| Others | 0.7% | 1.4% |
| Services | 6.3% | 7.5% |
| RDX Royalty | 3.3% | 2.7% |
| Total | 100.0% | 100.0% |
Combined Tandberg+Overland for year ended June 30, 2013
| in $ million | Overland | Tandberg | Pro Format Adjustments | Pro Format Combined |
| Revenue | 48.0 | 62.6 | (0.9) | 109.7 |
| Net loss | (19.6) | (15.3) | 6.4 | (28.5) |
The two old companies have built a huge channel in the world, with over 16,000 partners, Overland being more represented in USA and Tandberg in Europe.
Conclusion
When you combine two not profitable companies with revenue declining regularly and in trouble with patent litigation, you have few chances to succeed even if you can reduce expanses following the consolidation.
Other problem: the two firms do not have complementary products. They have about the same, being involved in tape drives and automation, in disk subsystems where smaller Overland is stronger and Tandberg never was successful. Tandberg is very active in RDX which is sold as a substitute of ... tape.
The merger seems to be the last possibility for Cyrus Capital to avoid to lose all its investment in the two companies and maybe to try to sell a better and bigger package.
Read also:
Overland's Board Evaluates Merger With Tandberg
Following proposal from European company's owner Cyrus Capital
Overland Could Merge Rapidly With Tandberg
Two US and European old tape companies in bad shape (with our comment)
Overland Into Definitive Agreement to Acquire Tandberg
Combined revenue to exceed $100 million for last fiscal year
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